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Matthias Knab, Opalesque: In May, the third "Artificial Intelligence in the Financial Sector" conference took place, following previous events in 2022 and 2021. For the second time, Alissa Stein moderated. And for the first time, asset management company PLEXUS Investments hosted the format as a presence event and in German. The conference in Frankfurt am Main was sold out.
Liechtenstein-based PLEXUS Investments AG has been managing exclusive asset mandates since its founding in 2006. Prior to that, PLEXUS founder and managing director Gunter Jager headed the portfolio management of the Princely Portfolio and Multimanager products at LGT Capital Management. He initiated and hosted the conference.
The message is clear: AI is moving into the fund industry
Once again, it became clear during the course of the event with its expert presentations, panel discussions and an afternoon workshop: the transformation of finance through artificial intelligence (AI) and machine learning is in full swing. PLEXUS has already been accompanying this process since 2017 with its in-house "AI Think Tank". In 2022, PLEXUS started a German-language podcast "Artificial Intelligence in Asset Management. Simply explained". Gunter Jager and other interviewees from finance and asset management practice explain important terms relevant to AI in asset management in entertaining interviews from A to Z, arranging and explaining the core terms in alphabetical order.
In finance, AI-powered technologies are used, for example, to automate investment processes, make decisions based on data, i.e. more objectively, and to detect fraud.
AI can also be used to further develop transaction processing, risk management and customer service. By eliminating repetitive activities in particular, (human) employees can focus on more strategic and value-adding activities.
In addition, AI can analyze much larger volumes of data much faster than humans can. This also allows patterns and trends to be identified that remain hidden to humans working manually. Asset managers can use information about this to better adjust opportunities and risks in investments and lending.
And if financial companies are able to detect fraudulent transactions, such as credit card fraud and money laundering, faster than before, they can protect their customers' assets and their own reputation.
Award: for artificial intelligence in the financial industry
So much for the background. But before AI applications can be useful in asset management practice, science is usually at work. That is why PLEXUS Investments has been awarding a "Promotional Prize for Artificial Intelligence in Finance" since 2020. It is endowed with 10,000 euros and intended to motivate the winners to further research and developments that will benefit the financial industry. The award is open to students and doctoral candidates.
The sponsorship award jury is made up of high-ranking members:
Prof. Walter Farkas, Professor of Quantitative Finance at the Institute of Banking and Finance at the University of Zurich and Associate Member of the Department of Mathematics at ETH Zurich,
Christof Kutscher, Chairman of Bergos AG, Zurich, Board Member at Carmignac, Paris, and former Chief Executive Officer at Climate Asset Management, London,
and Prof. Stefan Mittnik, Professor of Financial Econometrics, holder of the chair of the same name at Ludwig Maximilian University in Munich until 2020, and co-founder of Scalable Capital, a digital financial services provider.
The third promotional award for Artificial Intelligence in Finance was shared at the AI conference in May by Dr. Urban Ulrych from EPFL (Ecole polytechnique federale de Lausanne) and Sebastian A. Ott from the UBS.
Revolutionary: New competitors in asset management
According to award founder Gunter Jager of PLEXUS, there are two main directions in the use of AI in asset management:
The evolutionary approach: established asset management companies in particular are applying AI - rather slowly, but surely. That is, they are gradually, rather cautiously, integrating AI into their processes.
The revolutionary approach: Above all, start-ups, especially from colleges and universities, which previously had no or hardly any conventional asset management experience, begin with a "blank sheet of paper". They are not influenced by the financial industry, but by data or technology research.
PLEXUS CEO Gunter Jsger sees the greater "disruptive potential" in the "revolutionaries." But the evolutionary approach also clearly benefits companies. That, too, became clear at PLEXUS' AI conference in May.
Intelligent modeling: success needs constant evolution
The conference program was well received by the audience. One of the speakers was Dr. Andreas Sauer, Principal at ansa capital management GmbH - with 30 years of experience as a quantitative investment manager. The title of his presentation was "How AI is changing quantitative asset management." Among other things, he pointed out that every quantitative investment strategy leaves digital traces and strategies can quickly become worthless due to AI use and quantitative analyses of market participants. Lasting competitive advantages could therefore only be gained by asset managers who continuously critically review and develop their AI-based strategies. "Intelligent modeling" is what Andreas Sauer called this.
Speakers from AI-focused investment boutiques Artellium, QI Investment and Tungsten Capital Management continued the lecture series. The companies are based in Germany and some already have track records of several years.
Should we do what we can? Ethical questions become more relevant
With Prof. Dr. Saskia Nagel, head of the Applied Ethics teaching and research at the Department of Society, Technology and Human Factors at RWTH Aachen University, ethics also got its deserved place at the AI conference. "Should we do what we can?" was the title of her talk. Prof Dr Nagel pointed out that ethicists were less interested in offering solutions, but rather "arguments for one direction or another."
What became clear in her speech was that responsibility is based on knowledge and control. However, she said, this becomes a real challenge when it comes to AI-driven actions or recommended actions. Thus, she asked, "What if humans no longer control, or cannot understand or comprehend what AI is doing? And what if the AI contradicts the human?" Thoughtful faces in the audience ... Prof. Dr. Nagel also explained that while technology can be relied upon if necessary, it cannot be trusted. Trust always exists from person to person, or - at most selectively - to institutions. But trusting a technology is not possible. According to the ethicists, this is a "category mistake".
In the afternoon of the conference, quite a few of the asset management professionals in the audience took part in the three-hour workshop "Using artificial intelligence profitably in asset management". Workshop leaders were Prof. Dr. Florian Weigert of the Universite de Neuchatel and Maximilian Sauer, portfolio manager at ansa capital management.
Opalesque was also on site. We expect the conference to be a worthwhile continuation next year. The fourth PLEXUS Prize for Artificial Intelligence in Finance, to be awarded in 2024, has long been announced.
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